Irrigation wells will be hooked together and underground pipe buried soon as work gets underway on the largest underwater reclamation project in the history of Nebraska.

Despite an unsettled lawsuit, the mega-water farm in southern Lincoln County is under development to send water to Kansas.

Developers hope the water will fulfill a long-standing agreement with Kansas, which is overseen by the federal government, and want to have the farm pumping water out of the Nebraska aquifer by the end of the year.

Pipeline installation will begin during the first two weeks of September, said Nate Jenkins, the assistant manger of the natural resources district that has taken the lead in pushing for the project – the Upper Republican River NRD.

Jenkins said 5-6 miles of pipeline will be buried to take well water into the head of Medicine Creek, where it will begin a 150 mile trip down the creek and Republican River to Kansas.

Jenkins said 30 irrigation wells that formerly pumped water to crops will be hooked together underground and connected to the pipeline. The above-ground pumps will no longer be used. Submersible pumps will be installed in well casings.

The cost of the well-field renovations and the pipeline is $18.3 million, according to public records.

The pipeline will have the capacity to dump 60,000 acre feet a year into the Medicine Creek. Put another way, that’s enough to cover nearly 100 square miles with a foot of water.

And, to finance the land, $92.5 million in bonds are expected to be offered for sale Sept. 6. Those bonds will pay for the farmland – a 19,500 acre tract in the sandy hills.

Criticisms

The bonds are rated “A+” -- four steps lower than the best AAA rating and four steps higher than the BBB-minus rating, which is just above junk bond status, according to Standard and Poor’s.

The bonds will pay 2 percent interest in early years and 6 percent in later years, according to an Aug. 9 published notice.

To pay back bond holders, developers will levy a $10 a year ccupation tax on irrigated acres in the area.

However, the lawsuit challenging the water farm complicates the financial arrangement.

The lawsuit, filed by two irrigation districts (groups of irrigators), say the deal will illegally take their water in federal lakes to which they have held the rights since the 1940s.

They filed the lawsuit in December but no ruling has been issued.

If a judge rules the water farm is illegal, the $10-an-acre tax cannot be assessed, which would threaten the financial stability of the deal. But the owners (four taxpayer funded natural resource districts) would look for other ways to pay bond holders.

The land is an income-producing asset, Jenkins noted.

The price of the land was $110 million, around $5,600 an acre, paid at the height of a land price boom in Nebraska. In three years from 2010-12, the average land price more than doubled in Nebraska, according to the University of Nebraska.